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Walgreens + Rite Aid = UFCW S.O.S.

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John Briley

Posted: Mon Nov 02, 2015 3:04 am

Joined: 21 Nov 2007
Posts: 2157

With announcement(s) coming from the UFCW Local Unions here in California re: their recent Rite Aid Contract Settlements, raises questions once again, as to what is going to take place with our Rite Aid Members, as a result of Walgreens buying Rite Aid and how the Federal Trade Commission (FTC) will ultimately rule on another Mega Sale!

For the record, let's review once again the "recent" Southern California Local Unions Rite Aid Contract Settlement announcement.

Rite Aid clerks authorized a new collective bargaining agreement by an unprecedented 99% “yes” vote across Northern California. The overwhelming vote was the product of nearly two years of negotiations with the company. After months and months of hard bargaining an agreement was finally reached that meets the needs of the members.

The highlights of the agreement include significant wage increases for clerks and pharmacy techs, a continuation of union trust fund benefits with no additional co-pays or out of pocket charges and continued employer contributions into the trust fund pension. The members who held the line during this extremely long set of negotiations deserve full credit for bringing the contract settlement to fruition.

An excellent agreement was also negotiated in the pharmacist classification.

Unfortunately the vote there had neither enough votes to reject the agreement or authorize a strike.

Accordingly the matter was referred to the Executive Board of Local 5 which voted to authorize acceptance of the tentative agreement on behalf of the union pharmacists at Rite Aid.

The Rite Aid deal, announced Tuesday, would combine the second- and third-largest drugstore chains in the U.S., with a total of about 12,800 locations, helping Walgreens vault past market leader CVS Health Corp. The acquisition will add to Walgreens’ earnings beginning a full year after completion and will produce more than $1 billion in savings from cost overlaps, the companies said Tuesday in a statement. Including debt, the deal is valued at $17.2 billion, they said.

The $17.2 billion deal puts together the nation's second and third largest pharmacy chains that combined will have nearly 13,000 U.S. stores. That would catapult the merged company above CVS, which has 7,800 stores.

The deal, which will have to pass antitrust review, is another sign of increased consolidation in health care as the industry changes due to the Affordable Care Act and an aging population.

Rite Aid stores would keep their names "initially," but Walgreens plans to create "a fully harmonized portfolio of stores" over time, the company said in announcing the deal Tuesday.

Walgreens Boots Alliance is willing to unload up to 1,000 stores in order to win regulatory approval of its $17.2 billion deal to acquire Rite Aid, the company said in a securities filing.

The cap represents about 8 percent of the combined company's 12,700 U.S. stores.

The proposed merger of two of the three largest drugstore chains requires the approval of the Federal Trade Commission. Two influential U.S. senators have called for an examination of whether the deal would raise drug prices for consumers and reduce choice.

Subsequently following the above Walgreen / Rite Aid Mega Sale, UFCW Local 5 and UFCW Local 8 posted the following on their respective websites.

An announcement was made on October 27 that Walgreens is purchasing Rite Aid. This transaction would result in the second largest drug store company in the country. CVS would maintain its status as the largest chain with some sixty percent of the market but the new Walgreens, with the addition of Rite Aid, would be second largest at about 40% of the stores in the retail drug industry.

Regardless of the purchase by Walgreens, Local 5 members working at Rite Aid will continue to be covered by all terms and condition s of the recently ratified union contract. The job protections, wage protections and health and welfare coverages made possible by the contract will remain in full force and effect. There is some distance to go before this announced takeover is final. The proposal must pass the scrutiny of the Federal Trade Commission and other government bodies before it can be finalized.

The company has the obligation, mandated by federal law to engage the union in talks regarding the purchase. Local 5 will continue to forcefully advocate for your interests with management and keep you up to date on developments. Visit www.ufcw5.org for updates.

Protecting Members a Top Priority in Walgreens Bid to Purchase Rite Aid

Posted On: Oct 28, 2015

Walgreens has reached an agreement to purchase Rite Aid but the details of the deal are complicated and not yet finalized.

Rest assured, the terms of the contract remain in full effect. Your Union leaders have already been in contact with Rite Aid and will continue to discuss the details and ramifications of any sale. As more information of the sale becomes available, we will continue to keep you informed.

Over the next several months, government regulators will examine the deal between Walgreens and Rite Aid and determine if it will be allowed to move forward.

Protecting the rights of UFCW 8 members and the integrity of the contract through this process and beyond is our highest priority. Support your Union with your words and actions and we will continue to demonstrate Solidarity Works!

As I've watched the UFCW / Haggen debacle unfold in Southern California, Arizona and Nevada over the past several months, you've got to wonder what will be the final decision / outcome from the FTC re: another Mega Sale between Walgreens and Rite Aid and how it will ultimately impact our UFCW Members?

Rite Aid Management has informed us of the following: “The collective bargaining agreements of Rite Aid’s subsidiaries remain in effect as Walgreens Boots Alliance and Rite Aid operate as independent companies. Walgreens Boots Alliance has no control over the labor relations of Rite Aid’s employer subsidiaries, and those subsidiaries will continue managing day-to-day labor relations and, where applicable, collective bargaining for new contracts.”

We expect that Government Regulatory Agencies will be reviewing this merger and there may be some requirements to divest stores. This will take several months and your Union will closely monitor the situation as it unfolds.

When you compare Local 324's following comment,.....

Quote:

We expect that Government Regulatory Agencies will be reviewing this merger and there may be some requirements to divest stores.

to the following comment found in the above-mentioned Chicago Tribune article,....

Quote:

Walgreens Boots Alliance is willing to unload up to 1,000 stores in order to win regulatory approval of its $17.2 billion deal to acquire Rite Aid, the company said in a securities filing.

With Walgreens Boot Alliance willing to unload up to 1,000 stores, got to wonder which stores will they select?

All Rite Aid Stores? All Walgreen Stores? Or a combination of both!

Either way, the "possibility" of unloading 1,000 stores will impact many members / employees from each Co.

Walgreens To Buy Rite Aid At A Great Price, To Become The Largest U.S. Pharmacy

Forbes / Nov 2, 2015

Excerpt:

However, given the size of the resulting entity (13,000 stores across the U.S.), the transaction will likely draw scrutiny from antitrust regulators. We believe Walgreens will have to divest stores in a few states where the concentration of stores will be too high. For example, in New York, Illinois and Michigan, the combined entity will have more than 2,200 stores compared to about 1,000 CVS stores. Similarly, in states with more than 500 stores (of the combined entity), Walgreens will have 70% more stores than CVS on average.

What is interesting is that Rite Aid will be a subsidiary owned by Walgreens and will continue to operate stores under its own brand. We believe this decision has more to do with Rite Aid’s branding efforts in the recent past, where stores were modified to the “wellness” format. Stores under this format have been performing better than the rest of the chain with higher comps growth. As these investments in branding are likely to reap more benefits in the future, we think the decision to continue with the Rite Aid brand is the right one.

Currently, Walgreens operates roughly 8,200 stores in all 50 states and the District of Columbia. Rite Aid, meanwhile, operates nearly 4,600 stores in 31 states and the District of Columbia.

Upon completion of the merger, Rite Aid will be a wholly-owned subsidiary of Walgreens Boots Alliance, according to a statement from Walgreens. Rite Aid is expected to initially operate under its existing brand name, and “decisions will be made over time regarding the integration of the two companies, ultimately creating a fully harmonized portfolio of stores and infrastructure.”

Earlier this week, Walgreens revealed in regulatory filings that its contract with Rite Aid allowed for the divestiture or closing of up to 1,000 stores, though the company said it expected the total to be less than half that amount. Walgreens runs about 8,200 stores, with locations in each state, while Rite Aid has about 4,600 stores in 31 states.

In his analysis, Garrick Brown, vice president of research at Cushman for the West Region, notes that Walgreens could close or sell 1,000 before the deal closes, and then shutter up to another 2,000 after.

Additionally,....

Quote:

Excerpt:
“The post-merger Walgreens real estate imperative will be to minimize cannibalization,” Brown wrote, noting that there are countless Rite Aid and Walgreens stores standing right in front of each other in many parts of the country.

Rite Aid stores are likely to bear the brunt of the closings. “Who will win in those instances? In most cases, it will be the Walgreens location simply because Walgreens sales per square foot are typically higher.”

Will the UFCW have to send out a,....

Quote:

Rite Aid stores are likely to bear the brunt of the closings. “Who will win in those instances? In most cases, it will be the Walgreens location simply because Walgreens sales per square foot are typically higher.”

Neither Walgreens nor Rite Aid has shed much light on what might be in store for the future of the Rite Aid headquarters and its employees. And a Rite Aid spokeswoman did not immediately respond to PennLive's questions on the issue this week. But clearly, Walgreens will be looking to help pay for the expensive deal by cutting costs of the combined companies – what Walgreens refers to as "synergies" from the takeover.

"All the talk about savings with synergies?" noted David E. Black, president and CEO of the Harrisburg Regional Chamber & CREDC.

"That means downsizing," he said. "And the downsizing is rarely with the acquiring company. What happens to this corporate office? Obviously, it is not going to be headquarters for Walgreens. If you are here and you work at Rite Aid or you have a family member there, what happens?"

Rite Aid's troubled history of family drama, high debt and mismanagement

By John Luciew

Updated November 09, 2015 at 10:21 AM

Excerpt:

The company was started and built by the frugal father. It was mortally wounded by the free-spending son, who would end up in federal prison for his role in a sweeping accounting scandal, costing investors millions in vanished stock value.

And now, 53-year-old Rite Aid Corp. is poised to be swallowed up by its giant, pharmaceutical-selling rival, Walgreens.

All along the way, this has been a story of high drama, even higher debt and highly questionable management, with East Pennsboro-based Rite Aid desperately holding on for dear life. All amid a fast-growing, quickly consolidating retail pharmacy industry that is going global.

It began in 1962 with a single store in Scranton called the Thrift D Discount Center. The architect of the business was Alex Grass, a Scranton-born lawyer who entered the business world in the early 1950s after marrying into Harrisburg's Lehrman family.

Rite Aid Corp. (NYSE:RAD) said after-hours Wednesday it scheduled a special shareholder meeting to vote on the previously-announced proposed merger with Walgreens Boots Alliance (WBA) for Feb. 4. Slated for completion in H2 2016, the merger is subject to approval by Rite Aid stockholders and other customary closing conditions. Shares of RAD were up two pennies in recent after-hours, moving in the upper half of the 52-week range of $5.88 to $9.47. WBA was inactive after closing just above the midpoint of the 52-week range of $71.46 to $97.30.

Federal antitrust regulators have requested more information from Walgreens Boots Alliance and Rite Aid in connection with the pending $17.2 billion deal to combine the drugstore chains.

The Federal Trade Commission holds the cards on how big Deerfield-based Walgreens can become. The agency generally takes a close look at any deal that reduces retail competition. Earlier this week, the FTC sued to block a planned merger between Staples and Office Depot because the agency said it would reduce national competition in the market for office supplies sold to large business customers.

*********************************

But doubt is starting to creep into the market about whether the deal will be approved. Scott Mushkin, an analyst at Wolfe Research in New York, said in a research note issued Thursday that the merger "seems to go against the spirit of antitrust laws in the U.S."

He cited four reasons why the planned merger might be in trouble. It appears to create significant market concentration, a unilateral reduction in competition, a reduction of choices for both drug plans and consumers, and the potential for a significant transfer of wealth from drugmakers to the combined company, Mushkin wrote.

Rite Aid management is questioning your union’s decision to oppose their merger with Walgreens. We want to be sure you understand why your union is hiring an anti-trust attorney to oppose the Rite-Aid/Walgreens merger. So here are the reasons:

• There is no guarantee that Walgreens will not close stores.
• There is no guarantee that Walgreens will continue to abide by the union contract and pay for your health care and pension benefits.
• There is no guarantee that divested stores will stay open or abide by the union contract and pay your current wages and benefits.

Despite what Rite-Aid says, their agreement with Walgreens and their proposal to the Federal government have NO GUARANTEES that you will keep your wages, retirement, contract, or even your job. Read Rite Aid’s letter carefully: there are no guarantees, but the letter does encourage you to ask questions. We agree that you should call the company representatives listed in the letter and ask some of the following questions:

• How long is the buyer of a divested store required to keep it open?
• Is the buyer required to continue to employ everyone?
• Is the buyer required to sign the union contract and pay for the same health care and pension benefits?
• If the buyer does close my store, like Haggen did, will I have bumping and recall rights?
• Is Walgreens required to keep all of the non-divested stores open?
• Is Walgreens required to keep all of the employees in non-divested stores?
• Is Walgreens required to honor the union contract and pay for my health care and pension benefits in non-divested stores?

Right now, nobody knows the answers to these questions. Walgreens is negotiating with the government in secret. If those talks produce a deal that protects your rights, your union will welcome it. But we have to be ready to act swiftly if Walgreens gets a deal that jeopardizes our members. That’s why we hired an anti-trust attorney to oppose the merger and protect your job and your benefits.

....It is truly unfortunate that the UFCW So.Ca. Unions, including the I.U., didn't have the "courage" to take the same "cautionary / informative / transparent approach" with our Haggen membership(s) as they are currently attempting to do with our Walgreens / Rite Aid memberships!

President Obama’s Federal Trade Commission plans to decide before it leaves town whether to accept the proposed remedy in the Walgreens-Rite Aid merger — and approval of the $9.4 billion deal is not guaranteed, The Post has learned.

“It is most likely [FTC] Chairwoman Edith Ramirez addresses it before she leaves,” a source close to the situation said, and not leave it to a Republican-led FTC.

That means if she decides against the October 2015 merger, she could file a suit to block it next month. There is little indication yet which way she is leaning.

The U.S. Federal Trade Commission is not satisfied with Walgreens Boots Alliance Inc's (WBA.O) plan to divest stores to win antitrust clearance for its acquisition of Rite Aid Corp (RAD.N), Bloomberg reported, citing people familiar with the matter.

The FTC isn't convinced that Walgreen's proposal to sell 865 drugstores to Fred's Inc (FRED.O) would do enough to preserve competition that would be lost in the $9.4 billion tie-up, Bloomberg reported on Friday. (bloom.bg/2iJXpwf)

The FTC is also unlikely to complete its review of the deal before the deadline of Jan. 27 to close the transaction, the Bloomberg report said.

The news agency, citing two anonymous sources, said that Walgreens' plan announced last month to sell 865 drugstores to tiny regional rival Fred's (FRED, -3.47%) for $950 million hadn't convince the U.S. Federal Trade Commission's lawyers to sign off on the deal. The clock is ticking with only one week left before the companies' deadline to seal the $9.4 billion merger of the No. 2 and 3 U.S. drugstore chains.

When it announced the deal with Fred's last month, WBA said that if the FTC demanded a larger divestiture, Fred's would be compelled to buy additional Rite Aid stores.